e-discovery 2.0

Yesterday’s post about the top e-discovery software vendors prompted a couple of interesting comments. George Socha posted a response here, disagreeing with my conclusions; and someone else (“top8”, whoever that is) asked whether one should “always listen to the top 5-10 songs on the list…[or] use the top 5 software products, regardless of one’s situation.”

To clarify, I whole-heartedly agree with George that there is no such thing as a “best” e-discovery service provider – as George says, it really does depend on your situation and I can think of many cases where a smaller, less well-known firm is a better choice than a national brand.

But e-discovery software is different for 2 reasons. First, and most importantly, in software there are increasing returns to scale which do not exist for service providers. The more companies that use a particular software product, the better that product becomes. Speaking from personal experience, when you have a large number of demanding customers, they force you to make your product better – and give you the money to do it. That’s why most technology markets are incredibly concentrated: everything from databases (Oracle) to search engines (Google) have a single dominant player. We are still in the early days of the e-discovery software market, but ultimately I expect it will follow suit and consolidate around a very small number of players.

The second difference between e-discovery software and service providers is that enterprises cannot change their software vendors as easily as they can change their service providers. Once software is deployed behind the firewall, it is fiendishly difficult to get it out, requiring enterprises to pick a single product for all cases. By contrast, it is easy to change service providers, so enterprises can pick the most relevant expertise on a case-by-case basis.

To answer the question posed by “top8”, I am not suggesting that everyone should only read Harry Potter, watch American Idol, and (Heaven forbid!) listen to Britney Spears. Those are matters of personal taste where diversity is what makes for a rich, vibrant society. But there are very good reasons why so many corporations rely on Veritas for backup software, Oracle for databases, Symantec/McAfee for anti-virus, IBM for developer tools, and so on. In software, the best products only get better. That’s why, 5 years from now, the list of top e-discovery software vendors will be even shorter.

There are two independent analyst reports identifying the top e-discovery software vendors.

The first, published in June 2007, is the Socha-Gelbmann Annual Electronic Discovery Survey. The authors, George Socha and Tom Gelbmann, probably know more about e-discovery than anyone else you are likely to meet. As someone who has filled out their 178-page survey, I can tell you it is excruciating in its detail and incredibly rigorous. According to the report, George and Tom contacted nearly 1,000 individuals and collected detailed data from 115 organizations.

The second analyst report is Gartner’s MarketScope, which is published today (December 2007). Its author, Debra Logan, is fast emerging as one of the leading lights of e-discovery and has great instincts about the market. For her report, Debra tells me that surveyed 30 vendors and checked over 90 customer references.

The results from the two reports are as follows:

(1) Companies listed as “Top Electronic Discovery Software Providers Based on 7 Criteria” (Table 19 and 20), listed in alphabetical order. (2) Companies awarded ratings of “Positive” or “Strong Positive” (Figure 1), listed in alphabetical order.

Why are the lists so different? Primarily because of two main factors:

1. Gartner’s list mixes service providers and software companies whereas Socha breaks them out separately. The Socha report has an entirely separate list for service providers.
2. Socha’s report was completed 6 months earlier than Gartner’s. In that intervening period, several new players entered the e-discovery market. For example, Kazeon was ranked by Gartner earlier this year a “niche player” (lower left quadrant) in the enterprise search market, and has not been in e-discovery long enough to participate in the Socha study (or, if they did participate, they did not have enough e-discovery customers to gain a high ranking).

Conclusions

The first conclusion to draw from these lists is that any vendor not in them is probably not worth considering for e-discovery. If neither Socha nor Gartner ranked them highly, then the vendor either could not provide compelling customer references or has lost competitive bake-offs to someone who is on the list. Either way, they are best avoided.

The second thing that stands out is how different these lists are. Of the 21 vendors identified by Socha and Gartner, only 5 are ranked as top e-discovery software vendors by both of them. Those 5 are Attenex, Clearwell, FTI, Guidance, and LexisNexis. So, if you are an enterprise looking for an e-discovery solution, it is clear who you should call first.

Finally, it is worth noting that both these analyst reports are relatively new. This is the third annual survey for Socha, and the first MarketScope for Gartner. That speaks to the fact that e-discovery software is a new, fast-growing product area. More and more enterprises are adopting e-discovery software solutions, and asking analysts about them, because they offer such a compelling ROI.